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SURVEY

Thursday, November 29, 2012

IHH Healthcare: 3Q down but not out

3Q within expectations. 3Q core net profit slipped 19% y-o-y to RM96.1m,largely due to start up losses from Novena Hospital (Novena). Excludinglosses from Novena and exceptional items, net profit would have been up by22% to RM141.6m in 3Q12, from RM116.4m in 3Q11. 9M core profits (includingNovena medical suites) forms 76% of our forecasts.

Novena losses narrowing. In 3Q12, Novena saw more than 500 inpatientadmissions, contributing RM19.1m in revenues registering an EBITDA loss ofRM23.9m. This was an improvement from 2Q12’s EBITDA loss of RM28.3m.Management is optimistic that Novena’s performance will continue to improvewith increasing admissions on the back of rising number of specialistsoperating there. We understand that management still expects Novena to turnEBITDA positive by 2H13.

Recapitalising Acibadem for interest savings. The group intends torecapitalise Acibadem in order to repay a portion of the US$ debt, andindicated this should result in interest savings of US$11m p.a.. This isalso expected to reduce its exposure to currency fluctuations and result ina stronger balance sheet for Acibadem.

Maintain BUY, TP unchanged at S$1.38 (RM3.45). We are expecting aseasonally stronger 4Q. We maintain our BUY recommendation and sum-of-partsbased TP at S$1.38 (RM3.45). We reiterate our view that IHH remains a keyproxy to healthcare in the region, and coupled with its robust growthprofile (CAGR FY11-14F of 55%), offers investors an attractive exposureinto this sector.